Foreigners can now own property in selected areas in the kingdom, including the $1 billion financial harbour.

Areas selected for foreign purchase are in the capital city of Manama and in multimillion dollar tourism projects to the north and south of the country.

Analysts say the new law is aimed at bolstering the kingdom’s image as a leading financial centre in the Middle East.

For more than a decade, Bahrain has been working towards economic diversification. Bahrain’s oil reserves are small when compared to its oil-rich Gulf neighbours.

Finance Ministry Undersecretary Sheikh Ibrahim Al Khalifa told reporters that the island’s economy was expected to grow between five and six percent in 2003.